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At the first Djibouti Forum, Djibouti’s sovereign wealth fund is looking for co-investors.

Djibouti's sovereign wealth fund seeks co-investors at the inaugural Djibouti Forum.

Djibouti’s sovereign wealth fund says it is ready to co-invest beyond ports and military infrastructure as the East African country prepares to welcome investors from around the world for the major inaugural Djibouti Forum. Speaking to CNBC’s Closing Bell East Africa, Slim Feriani, CEO of the Sovereign Wealth Fund of Djibouti, says the Djibouti Forum, Gateway of Opportunities, offers a chance for the Fund to collaborate with would-be investors on a raft of opportunities in Djibouti and Africa more widely. The event is taking place at the Djibouti Palace Kempinski, from 12 to 14 May.

“The young sovereign wealth fund of Djibouti, known as FSD (Fonds Souverain de Djibouti), has been created to catalyse investments on top of all the tools and policies in place that facilitate foreign direct investment…

“There’s a lot happening in many sectors, and our role as an institution, as a sovereign fund, is to accelerate this and diversify our economy to beyond the ports and the military bases.

“The world is moving at breakneck speed around us. So it’s our responsibility to be part of this growth story and to open up the doors and the minds of all to Africa.”

Feriani says the fund, inspired by the example of Singaporean sovereign investment vehicles Government of Singapore Investment Corporation and Temasek, would look to partner with international investors on debt and equity investments in multiple sectors.

A forum for cooperation

The Djibouti Forum will highlight major areas of potential cooperation including tourism, energy and renewables, financial markets, agro-processing, technology and connectivity, and data centres. Partnership opportunities will feature for institutional investors, development finance institutions, private investors and governments.

“The idea for us is to have skin in the game with equity and debt,” says Feriani. “We see an opportunity for investors and we want to be the best. We want to be with the best companies, the best partners, who will be with us for the long term.

“We have big development finance institutions confirmed to be with us here in May, such as Africa50 and the International Finance Corporation (IFC), as well as a number of wealth funds and institutional investors. We expect 300 guests: half will be international.

“Investments require different partners and stakeholders. The Djibouti economy is interesting, but we are a gateway to the whole subregion, a market of 400 million people, as well as a bridge between Africa and the Middle East.”

Targets for investment

Feriani says that feasibility studies have shown that Djibouti needs 10 to 15 hotels within the next ten years. It is seeking further development of its new airport. Under

Under President Ismaïl Omar Guellé’s Vision 2035 the country is targeting self-sufficiency in energy by using 100% renewables. The country is already enabling investments in wind and solar energy, and geothermal and waste-to-energy are other approaches that are being seriously considered.

Another major area of focus, Feriani says, will be the development of Djibouti as an internet and technology hub. The Djibouti Data Centre is the first and only carrier-neutral data centre facility in East Africa, with access to all major international fibre-optic systems, connecting Europe, the Middle East and Asia Pacific regions with Africa. Improvement of fibre-optic cables is a regional priority, given the recent internet outages in East and West Africa bought about by damage to subsea cables.

“There are ten subsea cables landing in Djibouti,” Feriani continues. “We have ambitions just like Singapore, where just over 20 subsea cables land… to become a connectivity and digital hub ourselves.”

With East Africa’s cable outages thought to have been caused by anchor damage during Red Sea shipping attacks by Yemen-based Houthi rebels, there is a new imperative for secure cable sites. Feriani is keen to highlight Djibouti’s security advantages in a challenging region.

“We have six international military bases here, including those of the US and China: we are the only country to host those two superpowers. They are here because of the country’s leadership, because of the stability of the country, because of its geopolitical importance, and because of its strategic location.”

A trade hub

“Seventy percent of trade between Asia and Europe historically goes through the Red Sea from here. Thirty percent of Italian exports go to this part of the world. Hence, most developed countries have a vested interest in protecting their economic interests from ship piracy and other threats, and therefore they chose Djibouti as their base.”

That security profile enables the country to act as one of the region’s main trading entrepôts – and Feriani says building on its reputation as one of East Africa’s major ports is a necessity.

“The Port of Djibouti is, according to the World Bank, the second most efficient port in Africa after Tanger-Med in Morocco. This is a true competitive advantage.

The port serves Ethiopia for around 90% of its trade, but actually Ethiopia only represents around half of the port’s activities, which are wide ranging, including transshipment to serve the whole subregion in Africa, as well as the Gulf states, Europe and elsewhere…

Our ports are already state of the art. We will just continue to develop them.” Feriani says that the strength of the country’s currency further underpins its status as a trading hub.

“There has been a lot of talk from the investment community about the exchange rate risk in Africa. The Djibouti franc has been pegged to the US dollar since 1949 and at the current rate since 1973, so it’s as stable as could be, and Djibouti has no foreign exchange restrictions. There are no limitations on converting or transferring firm’s funds or on the inflow and outflow of cash.”

It is these strengths that the country is ready to highlight as it prepares to welcome investors in May for the Djibouti Forum.

“The idea, among other things, is to close the gap between perception and reality, so that we all collectively make an impact on Djibouti and Africa more broadly, because the opportunity for this century has got to be in Africa.”

 

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